10-Q: TriLinc Global Impact Fund Reports Q3 Loss, NAV Declines

TriLinc Global Impact Fund reported a significant net loss from operations and a decline in net asset value per unit for the nine months ended September 30, 2025, amidst persistent liquidity challenges and increased non-accrual investments.

Summary

• Net assets decreased to $273,358,853 as of September 30, 2025, from $281,135,972 as of December 31, 2024.
• Net asset value per unit declined by approximately $0.16, from $5.892 at December 31, 2024, to $5.729 at September 30, 2025.
• The company recorded a net change in net assets resulting from operations of $(7,770,119) for the nine months ended September 30, 2025, a significant decrease from $10,083,853 for the same period in 2024.
• Total investment income for the nine months ended September 30, 2025, was $16,342,955, down from $19,076,563 in the prior year period.
• Net change in unrealized depreciation on investments amounted to $(14,032,422) for the nine months ended September 30, 2025, compared to an appreciation of $1,651,915 in the prior year period.
• Net realized losses on investments totaled $(73,871) for the nine months ended September 30, 2025, compared to $0 in the prior year period.
• Cash balance significantly reduced to $672 as of September 30, 2025, from $98,199 as of December 31, 2024.
• Total liabilities increased to $9,485,777 as of September 30, 2025, from $4,454,209 as of December 31, 2024, partly due to a $2,876,926 repurchase obligation becoming binding.
• Regular monthly distributions have been suspended since June 2023, with no distributions made for the nine months ended September 30, 2025.
• Watch List investments increased to 22 companies, representing 58.1% of the fair value of total investments, up from 19 companies and 57.2% at December 31, 2024.
• Investments on non-accrual status increased to 16 portfolio companies with an aggregate fair value of $109,241,942 (42.0% of total investments) as of September 30, 2025, from 14 companies and $100,342,070 (37.4%) at December 31, 2024.

Sentiment

Score: 2

Explanation: The company's financial performance has significantly deteriorated, marked by a net loss from operations, substantial unrealized depreciation, and critically low cash. The net asset value per unit has declined, and regular distributions remain suspended due to severe liquidity constraints. A large and increasing portion of the investment portfolio is on the Watch List or non-accrual status, indicating persistent credit and collection risks. While some legal recoveries are underway and future cash inflows are anticipated, the overall outlook is highly challenging with ongoing restructuring, bankruptcy proceedings, and delays across multiple investments. The company is actively seeking new financing, which underscores its precarious liquidity position. These factors collectively point to a high-risk investment with significant downside potential.

Positives

• Total operating expenses decreased by $716,844 for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to lower professional fees and reduced reimbursement of consulting fees.
• The weighted average yield on the total investment portfolio increased slightly to approximately 13.0% as of September 30, 2025, from 12.6% as of December 31, 2024 (based on cost).
• The company received $75,000 and an additional $40,726 from restitution settlements with David Hu, related to the IIG fraud.
• The court approved the restructuring plan for Compania Argentina de Granos on July 31, 2025, with the first payment of settlement proceeds received in early October 2025.
• A judge granted Helios' application to recognize and enforce a UK judgment against Trustco Group Holdings Ltd. in Namibia on September 24, 2025.
• The company anticipates receiving approximately $6.2 million in cash from settlements by the end of 2025 and an additional $14.4 million by the end of the first quarter of 2026.

Negatives

• Net asset value per unit decreased by approximately $0.16 (2.7%) from $5.892 to $5.729.
• Net change in net assets resulting from operations swung from a $10.08 million gain in the prior year to a $7.77 million loss for the nine months ended September 30, 2025.
• Significant net change in unrealized depreciation of $14.03 million was recorded for the nine months ended September 30, 2025.
• Net realized losses on investments of $73,871 were recorded for the nine months ended September 30, 2025.
• Total investment income decreased by $2.73 million for the nine months ended September 30, 2025, compared to the same period in 2024.
• The cash balance was critically low at $672 as of September 30, 2025.
• Total liabilities increased significantly by over $5 million, partly due to a $2.88 million repurchase obligation becoming binding.
• Regular monthly distributions to unitholders remain suspended since June 2023, with no distributions made in the nine months ended September 30, 2025.
• The number of Watch List investments increased to 22 companies (58.1% of fair value) and non-accrual investments to 16 companies (42.0% of fair value).
• The value of equity warrants for Blue Arrow Biojet Holdings, LLC declined to zero due to continued interest accrual.
• Several investments, including Sancor, PT Citra, Dock Brasil, Cevher, Agilis Partners, and Surpapel, experienced fair value decreases due to ongoing issues, restructuring, or liquidation processes.

Risks

• The company is largely dependent on the efforts and performance of its Advisor, sub-advisors, and other service providers, with a risk of ineffectiveness or underperformance.
• Investments are subject to financial market risks, including changes in interest rates and global economic volatility.
• The illiquid and non-traded nature of investments makes accurate valuation difficult and sales at desired prices challenging, potentially leading to substantial discounts.
• There is a risk of loss if borrowers default on obligations, collateral is insufficient, or extensive legal and collection costs are incurred.
• For participation interests, the company's counterparty is typically the sub-advisor, increasing the risk of full recovery as direct recourse against the borrower or collateral is not possible.
• Many borrower companies continue to struggle to recover from the long-lasting impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, leading to inconsistent cash flows.
• Uncertainty surrounding U.S. trade policies, including tariffs and retaliatory measures, poses a critical near-term macroeconomic risk to borrowers.
• Appreciation of the U.S. dollar may make loan payments more difficult for borrowers operating in markets with depreciating local currencies.
• Investments with Payment-in-Kind (PIK) interest provisions expose the company to higher risks, including increased potential for loss and valuation difficulties.
• Concentration risk exists, with the largest loan by value comprising 25.9% of total investments and the five largest loans comprising 56.3% of the portfolio.
• Persistent liquidity constraints may continue to impact the company's ability to pay distributions or meet other obligations.
• The company faces significant uncertainty regarding the recovery of amounts due from IIG-related investments, which are subject to bankruptcy and fraud proceedings.
• Delays in restructuring and liquidation processes for Watch List investments could lead to further fair value decreases.
• The discontinuation of LIBOR and Synthetic LIBOR and the transition to alternative rates like SOFR could result in interest rate decreases on debt, adversely affecting cash flow.
• The company may be unable to obtain new credit facilities or additional financing to address its liquidity needs.
• The board of managers may, in its discretion, pursue a liquidation of the company or one or more alternative transactions.

Future Outlook

The global economy has shown resilience, but growth expectations have been modestly revised downward. Many of the company's borrowers continue to struggle with the long-lasting impacts of the COVID-19 pandemic and the Russia-Ukraine conflict, leading to inconsistent cash flows and decreased liquidity. Current macroeconomic conditions are not strong enough to facilitate a rapid and significant recovery in operating performance for these borrowers. U.S. tariffs and potential retaliatory trade measures remain a critical near-term macroeconomic risk. The company anticipates continued significant constraints on its liquidity, which will likely impact its ability to pay regular monthly distributions in the coming quarters. It intends to pursue multiple strategies to address liquidity needs, including the sale of investments and seeking new credit facilities and additional financing transactions.

Management Comments

• Gloria S. Nelund, CEO, and Kun Yong Park, CFO, certified that the quarterly report fairly presents the company's financial condition, results of operations, and cash flows, and that disclosure controls and internal control over financial reporting were effective as of September 30, 2025.
• Management believes the central issue driving results is that many borrower companies continue to struggle to recover from the compound impact of approximately three years of economic hardship stemming from the COVID-19 pandemic from 2020 to 2022, while current macroeconomic conditions are not strong enough for borrower companies to achieve a rapid and significant recovery in operating performance.
• The company intends to continue pursuing multiple strategies to address its liquidity needs, which may include the sale of all or a portion of certain investments, seeking to obtain new credit facilities, and the pursuit of additional financing transactions as needed to supplement cash flows.

Industry Context

The company operates in the impact investing sector, focusing on Small and Medium Enterprises (SMEs) in developing economies. The broader industry context is characterized by global economic volatility, tighter monetary policy, and persistent inflation, which have created challenging conditions for many of its borrowers. The long-term effects of the COVID-19 pandemic and geopolitical conflicts continue to hinder the recovery of these SMEs. The transition from LIBOR to SOFR for floating interest rates is also a notable industry-wide change affecting the company's debt instruments.

Comparison to Industry Standards

• The company believes that not deducting the accrual for estimated future distribution and other fees in its net asset value (NAV) determination is consistent with industry standard, as it aims for NAV to reflect the estimated value on the determination date.

Corporate Governance

Legal Proceedings

• The company was not a defendant in any material litigation as of September 30, 2025.
• Ongoing bankruptcy proceedings for IIG TOF B.V. in the Netherlands, with the company seeking recovery of amounts due.
• Compania Argentina de Granos' debt restructuring plan was approved by the Argentinian court on July 31, 2025, with first settlement payment received in early October 2025.
• Court awarded the company $4.6 million in proceeds from an escrow account related to claims against Frigorifico Regional Industrias Alimentarias, S.A. and Algodonera Avellaneda S.A.
• Sancor Cooperativas Unidas Limitada filed for concurso preventivo protection (equivalent to U.S. Chapter 11 bankruptcy) in Argentina in February 2025; the company has filed claims, and Sancor has objected.
• A judge granted Helios' application to recognize and enforce a UK judgment against Trustco Group Holdings Ltd. in Namibia on September 24, 2025; counsel expects an appeal and is preparing a writ to freeze assets.
• PT Citra Labuantirta is undergoing PKPU claim proceedings (Indonesia's equivalent to U.S. Chapter 11 bankruptcy), initiated by a supplier, with the company's claim recognized by the court.
• Lidas SRL entered into a court-supervised restructuring process in September 2025, in which the company is actively participating.
• The company filed a 'hecho relevante' notification with the Superintendencia de Compaas (SIC) regarding WinRep S.A. and Vannapack S.A.'s defaulted debt, leading to an internal investigation by the SIC.

Related Party Transactions

• The Advisor earned $4,228,500 in asset management fees for the nine months ended September 30, 2025.
• The company sold a portion of its investment in TriLinc Peru S.A.C. for $1.0 million to TriLinc Global Impact Fund II, Master, Ltd., an entity whose advisor is under common ownership with the company's Advisor, resulting in a $74,000 realized loss.
• Amounts due to affiliates totaled $451,455 as of September 30, 2025, representing reimbursement obligations for certain operating expenses initially paid by an affiliate of the Advisor.

Stakeholder Impact

• Shareholders/Unitholders: Negatively impacted by a decrease in net asset value per unit, a net loss from operations, suspension of regular distributions, and increased risk exposure from Watch List and non-accrual investments. Liquidity for repurchases remains highly restricted.
• Borrowers: Many continue to face significant economic hardship, leading to defaults, restructurings, and bankruptcy proceedings, impacting their ability to repay obligations.
• Advisor/Sub-advisors: Continue to receive management fees and are actively involved in managing distressed investments, restructuring efforts, and legal proceedings.
• Creditors: Involved in various legal and restructuring processes to recover amounts owed, with outcomes and timing remaining uncertain for several investments.

Next Steps

• Continue pursuing multiple strategies to address liquidity needs, including the sale of all or a portion of certain investments.
• Actively seek new credit facilities and additional financing transactions to supplement cash flows.
• Sancor's counsel intends to meet in person with the judge and bankruptcy trustee regarding the concurso proceeding.
• Counsel for Trustco is preparing a writ to execute a judgment to freeze certain Trustco assets, following the recognition of the UK judgment in Namibia.
• The trial for the Elisenheim property case related to Trustco is postponed until January 2026.
• A hearing for MICD administrator appointments is scheduled for December 2025.
• PT Citra Labuantirta has appointed a financial advisor to prepare a restructuring plan for all creditors.
• The restructuring plan for Agilis Partners is expected to close by the end of 2025.
• The company expects to fund the payment of past and current operating and other accrued expenses with anticipated cash proceeds from settlements.
• If liquidity constraints lessen and cash on hand materially increases, the company expects to reinstate cash distributions to unitholders and unit repurchases.

Key Dates

Recommendation

The company's financial results for the nine months ended September 30, 2025, demonstrate a significant deterioration in performance, characterized by a net loss from operations, substantial unrealized depreciation, and realized losses. The net asset value per unit has declined, and critically low cash balances have led to the continued suspension of regular monthly distributions. A large and increasing portion of the investment portfolio is classified as Watch List or non-accrual, indicating severe and persistent credit and collection risks across numerous investments. While some legal recoveries and anticipated cash inflows offer a glimmer of hope, the overall liquidity position remains precarious, necessitating the active pursuit of new financing. The pervasive challenges, ongoing restructuring, bankruptcy proceedings, and delays across multiple investments present a high-risk profile with significant downside potential for investors. Given the current financial distress and uncertain outlook, a strong sell recommendation is warranted.

Keywords

Impact Investing, SME Finance, Developing Economies, Private Debt, Term Loans, Trade Finance, SEC Filing, 10-Q, Financial Results, Investment Portfolio, Liquidity, Net Asset Value, Unrealized Depreciation, Realized Losses, Distributions, Watch List, Non-Accrual Loans, Sarbanes-Oxley, Corporate Governance, Risk Management, Loan Restructuring, Bankruptcy